Job Market Signaling and Screening: An Experimental Comparison
CentER Discussion Paper No. 2003-124
42 Pages Posted: 25 Oct 2005
Date Written: October 2005
We analyze the Spence education game in experimental markets. We compare a signaling and a screening variant, and we analyze the effect of increasing the number of employers from two to three. In all treatments, there is a strong tendency to separate. More efficient workers invest more often and employers bid higher for workers who have invested. More efficient workers also earn higher wages. Employers' profits are usually not different from zero. Increased competition leads to higher wages only in the signaling sessions. We find that workers in the screening sessions invest more often and earn higher wages when there are two employers.
Keywords: Job-market signaling, job-market screening, sorting, Bayesian games, experiments
JEL Classification: C72, C73, C91, D82
Suggested Citation: Suggested Citation